The economic efficiency of an oligopolistic industry is hard to evaluate.

A. Allocative and productive efficiency are not realized because price will exceed marginal cost and, therefore, output will be less than minimum average-cost output level. Informal collusion among oligopolistics may lead to price and output decisions that are similar to that of a pure monopolist while appearing to involve some competition.

TWE:

The economic inefficiency may be lessened because:

1. Foreign competition can make oligopolistic industries more competitive on a global scale.

2. Oligopolistic firms may keep prices lower in the short run to deter entry of new firms.

3. Over time, oligopolistic industries may foster more rapid product development and greater improvement of production techniques than would be possible if they were purely competitive

Other types of behavior an Oligopoly can take & Government intervene:

Cartel:

Is the Collective Sale of Sports Rights Equivalent to a Cartel?Questions:> Why would BskyB be happy for the premier league to act as a cartel?> Why may consumers suffer under these conditions?> Why does the Government not interevene in this particular cartel?

Price Discrimination:

Pay-TV companies could be forced to lower prices as EU launches probe into sales of football and film rightsQuestions:> What Conditions must exist for Price Discrimination to occur?> What is the incentive for a firm to do this?> Are there any possible benefits of price discrimination?